Data released on Wednesday, showed the Consumer Price Index rose 0.1% in February against expectations of a flat reading. Analysts at Wells Fargo point out the strength in consumer price inflation won’t last. They see, both headline and core inflation, set to slow, giving the Federal Reserve more reason to ease further.
“Consumer price inflation was a bit stronger than expected in February, increasing 0.1%. As expected, lower energy costs were a drag, but the headline was boosted by the largest increase in grocery prices in more than five years.”
“The collapse in oil prices stands to send inflation sharply lower in the coming months. We expect CPI to increase just 1.4% yr/yr in Q2. The drop is not expected to bleed over into core inflation, but the core is nonetheless likely to slow as prices for hotels and airfare decline amid a pullback in travel.”
“The disinflation ahead will give the Fed more reason to ease.”